Small Caps Roll Over into the Close
Most foreign markets were closed overnight for May Day celebrations. However, a larger-than-expected interest rate cut in Australia and a PMI report in London was keeping U.S. futures modestly higher-to-flat ahead of this morning's data.
Tuesday's session opened flat and continued to hover around breakeven until the ISM data was released after the opening half hour. Then the SPX quickly surged 14 points as the market reacted favorably to the ISM data. But the high of the day was on the chart just before noon followed by several hours of mild downward drift. The closing hour saw the downward motion accelerate a bit on the SPX while the Russell 2000 small caps simply rolled over and surrendered the entire gains from the day. While the Dow and the SPX managed to close with gains, this was ugly for the small caps.
Our Market Leaders Board has everyone closing in positive territory except for the Russell 2000 which closed just marginally in the red while the Financials were leading the way higher.
SPX big winners were Sears Holding Corp (SHLD) 14.48%, Archer Daniels Midland (ADM) 7.02%, and Chesapeake Energy Corp (CHK) 5.73%. SPX big losers were ConocoPhillips (COP) -27.04%, Meadwestvaco Corp (MWV) -9.64%, and Avon Products Inc (AVP) -8.3%.
SPX five day big winners are Expedia Inc (EXPE) 32.02%, Sunoco Inc (SUN) 24.24%, and Sears Holding Corp (SHLD) 22.65%. SPX five day big losers are ConocoPhillips (COP) -21.38%, H&R Block Inc (HRB) -11.63%, and Akamai Technologies Inc (AKAM) -10.94%.
New Ten Day Highs: MMM, ABT, ANF, ADBE, AES, AFL, A, ARG, ATI, ALL, MO, AEE, AEP, AXP, AIG, AMT, APC, ADI, APA, AIV, ADM, T, AN, AVB, AVY, BHI, BCR, BAX, BBY, BIIB, BMC, BA, BXP, BSX, BRK.B, COG, CAM, COF, CAH, CCL, CBG, CNP, CTL, CHK, CVX, CB, XEL, CINF, CTAS, CMS, CMCSA, CMA, CSC, ED, DRI, DVA, DF, DE, DNR, DVN, DTV, DFS, D, RRD, DTE, DUK, ROST, ECL, EIX, EP, ESV, EOG, EQT, EQR, EXC, XOM, FIS, FITB, FE, FISV, FLS, BEN, GME, GPS, GE, GPC, HAL, HOG, HIG, HAS, HCP, HCN, HNZ, HSY, HPQ, HD, HON, DHI, HST, HBAN, TEG, INTC, IPG, IBM, IFF, IVZ, ITT, JBL, JPM, KEY, KIM, KFT, LM, LEN, LUK, LNC, L, M, MRO, MAR, MMC, MAS, MA, MAT, MKC, MCD, MDT, MRK, TAP, MUR, NTAP, NWSA, GAS, NI, NBL, JWN, NSC, NU, NTRS, ORLY, OXY, OMC, ORCL, PDCO, BTU, POM, PKI, PCG, PM, PXD, PBI, PNC, RL, PPG, PPL, PCP, PGN, PLD, PRU, PEG, PSA, QLGC, PWR, STR, RRC, RF, SLE, SCG, CVG, SLB, SNI, SEE, SHLD, SRE, SHW, SPG, SO, LUV, SWN, SE, HOT, STT, SUN, TROW, TE, TDC, BK, TMO, TIE, TMK, TRV, UNP, QLD, AEM, DYN, KBH, MBI, UNM, USB, VTR, VZ, VNO, VMC, DIS, WFC, WU
New Ten Day Lows: AVP, CAT, CELG, CME, COP, CMI, DOW, EMR, FLIR, F, HRS, IGT, JEC, K, LEG, MCK, MWV, MCO, NDAQ, NYX, ODP, PCL, SWY, SPLS, SVU, VXX, SH
Volume & Breadth Indicators
For the SPX Index there were 351 components advancing and 115 components declining. On the NYSE 3,166 issues were traded with 1,961 advancing issues and 1,097 retreating issues, a ratio of 1.79 to one advancing. There were 216 new highs and 8 new lows. The five day moving average of New Highs is 161 while the five day moving average of New Lows is 13 and the ten day moving average of Net Advancing is 301. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 2.58 to one. The closing TRIN was 0.64 and the final tick was -242. The five day average of TRIN is 1.1 and the ten day average of TRIN is 1.28. The NYSE Composite Index gained 0.56% today while the SPX gained 0.56%.
For the NYSE, relative to the previous 30 session average, volume was -2.67% below the average. Of the last 15 sessions 4 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 17 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 101.5% of the average daily volume for the last year. Volume was 112.5% of the last 10 day average and 117.9% of the previous day’s volume.
Moving Average and Support/Resistance Indicators:
64% of the SPX are above their five day moving average, 72.8% are above their 10 day average, 68.6% are above their 20 day moving average, 57.6% are above their 50 day moving average, and 78.4% are above their 200 day moving average.
There was one significant moving average crossover today as the Emerging Markets 5 DMA crossed above the 20 DMA. Our moving average Power Rating is 73 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +13%.
- Energy -- Outperformed the SPX by +96%.
- Financials -- Outperformed the SPX by +46%.
- Consumer Discretionary -- Outperformed the SPX by +8%.
Sectors weaker than the SPX for Tuesday:
- Industrials -- Underperformed the SPX by -28%.
- Technology -- Underperformed the SPX by -24%.
- Consumer Staples -- Underperformed the SPX by -31%.
- Utilities -- Underperformed the SPX by -7%.
- Health Care -- Underperformed the SPX by -20%.
What We Learned from Tuesday's Action:
Tuesday was session 5 to close above the 5 DMA, session 5 to close above the 10 DMA, session 5 to close above the 20 DMA, and session 5 to close above the 50 DMA. This was also session 2 for the 5 DMA to close above the 20 DMA. One early sign of a sustainable rally or pullback is often a close above or below the 10 DMA. The SPX closed 18.09 points above the 10 DMA.
The SPX 5 DMA is 1399.56, 10 DMA is 1387.73, 20 DMA is 1385.77, 50 DMA is 1385.04, 100 DMA is 1338.64, and 200 DMA is 1275.51.
On Tuesday the SPX traded above the opening range but did not trade below the opening range. 71% of the SPX closed up from the previous close; 73.4% closed higher than the open. During Tuesday's session the SPX gained 7.96 points from open to close. The SPX intraday trading range was 19.59 points. The 5-Day average intraday trading range is 11.08 points, the 10-Day average is 10.89 points, and the 20-Day average is 11.93 points. The trading range is expanding. The 5-Day SPX gain is 2.47%, the 10-Day gain is 1.08%, and the 15-Day gain is 3.48%.
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
The Market Environment for Wednesday is -1. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be sideways. Mel's 10 Day Oscillator is 47 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bearish for Wednesday's session.
This was a truly awful finish to what started out as a strong day. The NASDAQ almost closed down and the Dow couldn't hold its new highs. From a technical standpoint, the Dow new rally highs failed to be confirmed by the other indices. This suggests a bearish nonconfirmation but tomorrow's action is key.
Checking our Market Internals tonight, things still look bullish but there is a possible warning sign within the data. The Risk Sectors uptrending increased today 2% as the index gained almost eight points and the uptrending for the entire index caught up with the risk sectors. This frequently happens as the market reaches a turning point, but the trend remains upward, at least for now.
Wednesday, May 2
07:00 MBA Mortgage Purchase Index
08:15 ADP Employment Change - consensus 175K
09:45 ISM New York
10:00 Factory Orders - consensus -1.5%
1:00 US to sell $35b 5-year notes
01:30 JPY Labor Cash Earnings
07:15 CHF Retail Sales
07:55 EUR German Unemployment Change
07:55 EUR German PMI
08:30 GBP Net Consumer Credit
09:00 EUR Euro-Zone Unemployment Rate
22:45 NZD Unemployment Rate
Before: AMRI, AGN, ALE ,AB, AFAM, AGP, ASCA, AVA, ABX, BZH, CLDX, CEVA, CLH, CLX, CMCSA, CBE, CTB, COT, CVS, DWSN, DVN, EE, END, ENR, EPD, FELE, BEN, GRMN, GEO, GTN, WOLF, HSC, HSNI, IACI, ICE, KCP, MAC, MMP, MPC, MSO, MA, MTRO, MDS, MSCI, NICE, NVMI, OIIM, OZM, OHI, PKD, PCG, PNX, PEG, RDC, RRD, SEIC, SBGI, SKYW, SPW, SMP, SRZ, TWX, GTS, UBS, VNR, VSH, VC, VG, WCG, WXS
After: APKT, AEA, ABCO, AWH, ALL, AGNC, AEL, AWK, ANDE, NLY, ARTC, ATML, ATO, AVNW, AXTI, SAM, BKD, CACI, CALD, CBEY, CENT, CRL, CNL, FIX, SCOR, CXO, CNQR, CLR, EXBD, CXW, CVD, DCT, DK, DWRE, DXCM, DHT, DRWI, DWA, DXPE, DX, EIX, EDMC, ELLI, ENH, ERII, ETP, ETE, EXXI, ENSG, EQY, ERT, ESS, EXM, EXL, EXLS, EXPD, EXTR, FARO, GGC, GERN, GLUU, GMXR, GBCD, GMCR, GLF, HGR, NSN, HIG, HTZ, ICFI, NSIT, TEG, IPI, IO, JDSU, KS, KERX, KIM, LGCY, LHCG, LBTYA, LNC, MMLP, MASI, MTRX, MXL, MDAS, MELI, MTD, MUR, NATL, NRP, NCIT, NKTR, NGD, NEWP, NVTL, NVEC, OMCL, ONNN, ONXX, OSUR, PDLI, PVA, PMC, PXD, PPO, PRU, QLTY, RNWK, REG, RNR, RRTS, SGMO, SGK, SWM, SKH, SKUL, SM, SMSI, SCCO, STAA, SUN, SXL, SPRT, SRDX, SYMC, TSO, TTEK, RIG, TCAP, TGI, UDRL, UNTD, VCLK, VVC, V, VOLC, WLT, WTW, WES, WGL, WFM, XNPT, YELP, Z
The ISM manufacturing survey came in at 54.8, better than the expected 53.0. Construction spending rose 0.1%, less than the consensus 0.5%. On Wednesday we will get the ADP employment report, oil inventories and factory orders.
Thank you for reading. Think on it, trade on it, and be well.